JLL: New York Becomes World’s Third-Priciest Office Market

Hong Kong and London retained their spots atop the world’s priciest premium office markets, but New York replaced Beijing in the third spot, reported JLL, Chicago. 

JLL compared office occupation costs in 31 cities worldwide and found tightening among the world’s largest markets over the past year–and a significant rent uptick in the priciest cities.

Midtown Manhattan overtook Beijing as the world’s third most expensive office market with total occupancy costs increasing to $194 per square foot compared to $171 per square foot last year, the report said. New York saw more than 10 percent rent growth, outperforming both Beijing and Shanghai, China.

“We continue to see upward rent pressure on the most coveted office space as vacancies shrink and the nation’s gateway cities wrestle with how to best strike a balance between prestige and affordability,” said JLL International Director Christopher Roeder. “Moderating rent growth in San Francisco is an example of the challenges these cities face.”

San Francisco fell by one position to eighth as rent growth there showed signs of softening, Roeder said. Boston moved up four spots in the ranking to enter the top 12 for the first time, while Washington, D.C. remained stable in 13th place.

JLL said corporate demand for prime office buildings in the big-city commercial office districts continues to outstrip supply, which pushes up occupancy costs. “Nonetheless, in tandem with overall global office trends, there is mounting evidence that the premium segment is moving into a late-cycle phase, with upward pressure abating as markets move more into balance,” the report said.

Most global gateway cities show premium-space shortages, with vacancy rates below 5 percent in general and below 2 percent in some gateway markets.

Traditionally, high-value, high-margin businesses such as financial services, professional services and high-end fashion/luxury goods have occupied prime office space, JLL said. “[But] more recently, a greater number of tenants from the technology sector are targeting premium buildings to attract top talent and enhance their brand equity.”

JLL Global Research Director Jeremy Kelly said affordability remains a concern in many large cities worldwide. “In order to remain competitive, the top global cities will need to execute bold urban transformation projects to ensure a supply of appropriately priced and flexible commercial space,” he said.